A Few Words About Sandra
At Sales Cookie, we automate commissions for companies with billions in sales. In this blog post, we interview Sandra Rowe, a veteran and proven sales leader with over 20 years of experience in B2B SaaS sales.
Sandra has a proven track record of building and leading Enterprise sales teams for established and emerging companies such as Salesforce, Everbridge, Berkshire Grey Robotics, and Cloud Compliance. She recently founded Winnersrowe, serving as the Chief Sales Officer and specializing in helping Revenue leaders take the guesswork out of scaling success.
If you’re looking for additional insights about SaaS and sales compensation, we encourage you to reach out to Sandra directly through her LinkedIn profile. Sandra, thank you for sharing such practical and valuable tips with us!
Which Commission Structure Do You Recommend?
Sandra has experience with SaaS-specific patterns (ex: recurring sales, customer churn, or multi-year contracts) and how they influence sales commissions. Using the same fundamental key building blocks (tiers, bonuses, accelerators, quotas, credits, guarantees, attainment, etc.), it’s possible to create thousands of different commission structures. Given the number of permutations, it can be difficult to choose a structure which is manageable, motivating, and “makes sense” to reps.
Sandra recommends building a structure that aligns with the company’s business objectives and motivates your sales team to achieve those goals. This typically requires some experimentation and fine-tuning over time.
Sandra recommends starting with a basic structure that includes fundamental building blocks like tiers, bonuses, and quotas and then customizing it based on your specific needs. For example, offer accelerators for reps who exceed their quota or provide guarantees for deals that take longer to close.
Companies often offer a balanced 50%/50% base salary vs. a variable model because it provides a fair and stable income for sales reps while incentivizing them to perform at a high level.
Spiffs or special incentives are another way to help sales reps achieve specific goals or behaviors. For example, if a goal is to increase annual recurring revenue (ARR), then your sales compensation plan should reward reps for closing new deals and upselling existing customers. On the other hand, if you focus on reducing churn, you should incentivize reps to renew contracts.
Caution: Spiffs may not be effective in all situations. For example, if the spiff is too small or difficult to achieve, it may not motivate sales reps to put in the extra effort. Additionally, if spiffs are used too frequently or inconsistently, they may lose effectiveness and become expected rather than motivating.
How Often Should Commission Structures Be Refreshed?
At Sales Cookie, we often deal with unstable commission structures. For example, a customer starts the year with a profit-based incentive plan. However, they realize mid-year that deals fall through because reps refuse to grant discounts. Mid-year structure changes can have a negative impact on sales reps. They feel the payout structure is unstable or management is artificially trying to limit compensation. We asked Sandra how companies can limit incentive plan churn.
It’s important to regularly evaluate and refine your plan based on your business objectives, market conditions, and team performance. Periodically analyzing your sales data helps to ensure that your sales compensation plan continues to align with your business objectives and motivates your team to drive revenue growth.
Sandra recommends an annual refresh of commission plans to adjust to internal and external market changes. Mid-year changes can be necessary but remain disruptive, leading to trust issues with reps.
Do You See Comp Structures Being Benchmarked?
With so many possible commission structures and fierce competition, does it make sense to use benchmarks when designing sales compensation? Benchmarks allow organizations to compare their sales compensation with others in the same industry, for example to ensure their compensation model is “within range”. From our experience, only a handful of companies use benchmarks when designing sales compensation, but is this a missed opportunity?
Benchmarks often provide valuable insights into what other companies in the industry are doing and can help ensure that the company’s compensation packages are competitive in attracting and retaining top talent. Using benchmarks can be a helpful tool for ensuring that the company’s compensation packages are competitive and aligned with industry standards. However, benchmarking can be a time-consuming and resource-intensive process.
What Causes Commission Errors?
At Sales Cookie, we see ~5-10% of payouts identified as overpayment before automation is deployed. Unfortunately, commission errors can cause cascading problems. First, it’s an accounting and compliance nightmare. Second, it’s difficult to reverse already made (incorrect) payments so money is lost. Third, data corrections can generate negative feelings of distrust, disappointment, etc.
High-quality sales data is fundamental. Bad data is the most common cause of errors. If the data is correct, then commission calculations will always be accurate.
Complex structures can also cause errors and be challenging to audit (think accelerators and splits).
It is also likely that overworked sales ops teams make mistakes. They need sufficient lead time and bandwidth to carefully review numbers to avoid impacting a sales rep’s motivation and trust in their employer.
Sandra has worked with compensation teams under a high degree of stress. Those teams spend 70+% of their time figuring out how to implement overly complex comp plans or resolving rep-initiated disputes. Not only is sales compensation a challenging role, but a constant focus on rep dissatisfaction/disputes does not help the business move forward. Unfortunately, when it comes to commissions, the rules of engagement often need to be clarified. Also, the execution of some plans has some ambiguity (ex: shared territories, split with partners, etc.). It’s best to think about those problems ahead of deployment.
Who Owns (Should Own) Sales Compensation?
At Sales Cookie, we see many different roles being responsible for commissions. Sometimes, the person in charge of commissions is the VP or sales, an external accountant, a payroll administrator, the finance department, etc. We asked Sandra who she thinks is best equipped to own commissions.
Ultimately, the best approach depends on the specific needs and structure of the organization. A successful process often requires a cross-functional team that includes sales, HR, and sales operations, representatives. These types of groups often help to ensure that the compensation plan is effective and meets the needs of all stakeholders.
Can You Provide Additional Tips?
Sandra had the following very useful recommendations.
Keep it as simple as possible!
It’s a red flag if reps ask mid-period how they get paid. People need clarity.
The more complex a plan, the more subjective it can be, which reduces trust.
Avoid internal competition.
Include multi-year deal incentives.
Recognize and celebrate success throughout the year
Ongoing awards and recognition are a huge missed opportunity in most companies.
Advertise big wins to show your appreciation. Highlight role models for the reps to emulate.
Besides money, reps are motivated by different things (ex: an extra day off).
Bring in some fun (morning coffees, informal get-togethers)!
Encourage teamwork: offering bonuses for achieving team-based goals
Set realistic targets: unrealistic sales targets can create a sense of frustration or resentment among sales reps, especially if they feel that they are being set up to fail. Work with reps to set realistic targets that are achievable but still challenging.
Align with customer value.
Sandra, thank you for sharing your thoughts on sales compensation. Here at Sales Cookie, we live and breathe commissions, and your findings resonate with us very much! To automate your commissions, click here. To reach out to Sandra, click here.